Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on what your duties are as an executor of an estates and when you need to pay all debts of the estate. Contact Baron Law Cleveland to answer all your questions on what your duties are and to help guide your through the upcoming events which are about to occur and how to handle any issues which may arise.
Appointment as a fiduciary of an estate, be an administrator or executor respectively, is a serious matter. A lot is expected of fiduciaries by the probate courts, friends and family, and the decedent friend or relative that trusted that their worldly possessions will be doled out according to their last wishes. An often-unappetizing aspect of fiduciary appointment is the payment of the estate’s outstanding debts and obligations. Discovering, organizing, verifying, then actually paying these debts is arduous, frustrating, and must conform with Ohio law. As such, it is wise to retain the services of an Ohio estate planning attorney. Working closely with someone with prior experience with probate administration and knows the ins and outs makes things much easier on an appointed fiduciary and avoids any situations which may attach personal liability for an estate fiduciary.
Payment of the decedent’s debts is one of the basic responsibilities of an estate fiduciary. Ohio law specifically provides that the fiduciary of an estate shall proceed with diligence to pay the debts of the decedent. The critical questions remain, however, of who to pay and when to pay them. Unless a fiduciary is confident that the estate will have more than enough assets to pay all of the debts of the decedent, it may actually be better not to pay any debts received until the expiration of the creditor’s claim period. When such period expires, only the majority of legitimate debts claims against the estate will remain because if specified claims are not brought timely, they are foreclosed as a matter of law. At this time it can be determined whether or not there are sufficient probate assets with which to pay the debts or if the estate is insolvent.
All too often a gung-ho fiduciary starts paying estate debts without a comprehensive accounting of estate assets or complete list of debts and obligations. This results in payment of debts which may have fallen off after the creditor’s claim period or, more seriously, if Ohio statutes are not fully complied during estate administration or assets are prematurely distributed, potential personal lability for a fiduciary. This means that if a surviving spouse, heir, beneficiary, or legitimate creditor should have gotten something from the estate that a fiduciary mistakenly gave away, the fiduciary must personally pay them their share, whatever the amount or value of the asset. This looming threat of personal liability is a significant reason why must appointed fiduciaries seek the counsel of experienced Cleveland estate planning and probate attorneys.
It cannot be understated the significant windfall potential for an estate if the six-month creditor’s claim period is waited out. The difficulty, however, is convincing friends, heirs, and devisees to be patient. Easier said than done. Now, after the debts of the estate are settled and verified and the time has come to pay them, unless the decedent’s will provides otherwise and/or in the absence of sufficient cash or other liquid assets to satisfy the debts, payment is made from the proceeds of the sale of: 1) tangible personal property which has not been specifically devised, then 2) specifically devised tangible personal property, then 3) non-specifically devised real property, and finally 4) specifically devised real property.
In most estates, the assets of the decedent will be more than sufficient to pay all of his or her outstanding debts. In those cases where the assets are insufficient, however, Ohio law establishes the priority for the payment of the debts per the following order:
- Administrative Expenses of the Estate – The first class of claims to be paid is the administrative expenses which include court costs, appraisal fees, attorney fees, and fiduciary fees.
- Funeral, Burial and Cemetery Expenses – The second class is the payment of funeral and burial costs which are paid in several stages. In the first instance, $4000 goes for funeral expenses, which are included on the funeral home’s invoice, plus any other expenses not included on the invoice but which are court approved, plus an additional $3000 for burial and cemetery expenses.
- Family Allowance – The third class of expenses to be paid is the allowance for support of the surviving spouse and minor children. Ohio law provides for $40,000 to the spouse and minor children for their support.
- Debts Preferred under Federal Law – The fourth class is those debts entitled to priority under federal laws. Most commonly this is specified taxes, interest, and penalties. This can encompass both personal and business tax liabilities.
- Expenses of Law Illness – The fifth class of debts are those related to the decedent’s last illness such as hospital costs and surgery fees.
- Additional Funeral Expenses– The sixth class of debts is the second instance where funeral costs are addressed. For the portion of the funeral director’s bill that exceeds $4000, an additional $2000 may be paid out at this point.
- Nursing Home Expenses – If the decedent was in a nursing home, managed care facility, or hospital long-term care unit, payment of these expenses fall into the seventh class of debts. This includes the “last continuous stay” which encompasses 30 days during which the decedent was living temporarily outside of the facility, such as when admitted to a hospital for urgent care.
- Obligations to the State – This class of debts includes personal property taxes, Medicaid Estate Recovery claims, and other personal obligations of the decedent to the State of Ohio, such as state income taxes.
- Wages owed by Decedent – The ninth class are debts which the decedent owed to others for manual labor, performed within the past 12 months, up to $300. This is likely a holdover from when $300 was a really significant amount of money.
- All Other Debts Allowed – The final debt class is an umbrella for all the remaining debts such as credit card bills, remaining funeral expenses, unsecured loan payments, etc.
Estate administration can be an arduous and long process, but it doesn’t have to be a confusing or scary one. A probate or estate planning attorney can guide you along the proper path and ensure you don’t fall into any mistakes. Having someone knowledgeable and experienced with Ohio probate law and administration watch your back is a priceless boon for ensuring quality of life during a stressful part of life.
You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.
Helping You And Your Loved Ones Plan For The Future
About the author: Mike E. Benjamin, Esq.
Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.
